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RBC Capital Markets analysts note that the US headline inflation edged down to 1.5% y/y in February to its slowest pace in more than 2y.

Key Quotes

“Energy prices rose after 3m of declines, & should exert less downward pressure on headline inflation going forward. We think Feb’s reading will be the low point for inflation in 2019.”

“Ex food and energy CPI also dipped to 2.1% from 2.2%. Core inflation has been slightly above 2% for a year now but is showing no evidence of accelerating, which should reinforce Fed’s current pause.”

“The combination of softer inflation readings and strengthening wage growth is boosting real incomes. Headline inflation is likely to remain below 2% for much of the year, which will keep that positive story for consumers in play.”